Koh Samui is expected to draw more hotel and residential investment despite last month's power glitch, but long-term prospects could be dented by poor infrastructure and planning, according to a market expert.
“The key issues are the same as in Phuket and all of Asia’s resort destinations at present. Private-sector investment fuelled by booming economies is not being matched by government spending on infrastructure,” said Bill Barnett, managing director of C9 Hotelworks, a Phuket-based hotel and residential consulting firm. “Also, Thailand’s resort destinations are no longer simple idyllic destinations but are becoming urbanised, with issues now of population growth, traffic, waste disposal and crime. Local government does not have the support for this growth.”
Samui made headlines in December after a rupture in a section of a 30-kilometre-long cable at tambon Taling Ngam on the island, leaving villagers and tourists without power for three days.
Still, Barnett foresees continued investment on Samui.
“We spoke to a number of [general managers] of international hotels over the incident. In some of the top properties which have full power capacity from generators, many guests did not know there was an issue. If the situation reoccurred it might be an issue, but there was minimal impact. The truth is that the upgrade of the electrical line was the issue, and it’s a positive that the new line was put in place.
“We continue to see new investors look at Samui, as supply and demand are favourable and the island is benefiting from positive sentiment in the market,” he said. C9 Hotelworks’ market update released in August showed that in the first half of 2012 there were 455,778 passenger arrivals at Samui Airport, driving hotel occupancy to the highest level since 2008 at 67 per cent, against 59 per cent in the same period of 2011. Most of the tourists were from Britain, Germany, Thailand, Australia and Eastern Europe. The overall average room rate of US$144 (Bt4,310) registered a slight decline of 1 per cent against the first half of 2011. In the same period, the revenue per available room (RevPAR) surged 12 per cent because of occupancy growth.
The report also found that the recent increase in direct international flights signalled potential for sustained tourism growth. Increasing land transactions and investor interest in existing assets and projects on hold could signal a new wave of development activity.
At the end of 2011, there were 448 hotels with 17,204 rooms on Samui. Brands making their presence felt on the island include Four Seasons, Starwood’s W, Banyan Tree, Six Senses, Orient Express and InterContinental. A new supply of 371 rooms is expected to enter the market over the next two years, through the opening of the 80-room Movenpick Resort & Spa Mae Nam Beach Koh Samui this year and the 210-room Ozo Samui in 2014.
Barnett noted that Samui’s tourism potential was now limited by the tight capacity of its airport.
“Its tourism numbers are restrained by the lack of capacity, and it cannot attract broader charter flights and low-cost carriers. This is not entirely a bad thing, as the hotel market has stabilised and positioned the island at the top end of the market, but longer-term it will impair the growth cycle. The airport, roadways, water and electricity are key priorities for the government,” he said.
Samui Airport now caters nearly 100 per cent to Bangkok Airways, the airport operator. Scheduled flights are also operated by Thai Airways International, Firefly and SilkAir. It is able to handle up to 2 million passengers per annum.
Declining to say whether rules and regulations to put a reasonable lid on new development are necessary, Barnett noted that the Thai government needed long-term planning and zoning for all tourist destinations, not just Samui.
“The government has turned a blind eye to its more important PR machine – Brand Thailand Tourism. Long-term planning and zoning exist in Singapore and [Hong Kong], but not Thailand. This is not a Samui issue, it’s a national problem,” he concluded.